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ADOPT A RESOLUTION TO APPLY, ACCEPT, AND APPROPRIATE GRANT FUNDING FROM THE CALIFORNIA DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT FOR THE HOMEKEY+ GRANTS PROGRAM IN SUPPORT OF SERVICE FIRST OF NORTHERN CALIFORNIA AND APPROVE THE ALLOCATION OF IDENTIFIED FUNDING TO THE HUNTER HOUSE AFFORDABLE HOUSING PROJECT
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Authorize staff to apply for and accept and appropriate Homekey+ grant funds of the State of California in an amount not to exceed $36,000,000.
a. Submit a Homekey+ application to the State in partnership with The Hunter House, LP for the Hunter House affordable development, a new construction project providing 120 housing units for individuals or households experiencing behavioral health challenges and experiencing homelessness or at risk of homelessness including youth, veterans and other disabled individuals.
2. Approve a Resolution of the governing body of the City of Stockton authorizing joint application to and participation in the Homekey+ Program,
3. Authorize a Resolution allocating $1,301,263 in Homeless Housing Assistance and Prevention (HHAP) grant funding to Service First of Northern California for the Hunter House affordable housing project,
4. Authorize the City Manager, or designee, to defund all awarded funding to Service First of Northern California for the Hunter House project if the Homekey+ funding process that commences with applications due in April 2025 does not result in approval and award of required funding to the Hunter House project; and
5. Authorize the City Manager, or designee, to take all necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
Service First of Northern California (Service First) is seeking gap funding through the State of California Department of Housing and Community Development (HCD) Homekey+ Grants program for the Hunter House affordable housing project. The Homekey+ Program requires a funding commitment from the City or other local governing bodies to apply for grant funding. The Homekey+ Program requires a resolution from the Stockton City Council, with the City as the lead applicant, to reinforce its commitment to proceed with a Standard Agreement for the grant, if awarded. Hunter House is a proposed 120-unit single housing complex located at 610 N. Hunter Street, Stockton CA 95202.
DISCUSSION
Background
On January 28, 2020, Council allocated $290,000 of HOME and $250,000 of Low-Moderate-Income Housing Fund (LMIHF) funds to support the Hunter House affordable housing project (Attachment A- Resolution 2020-01-28-1401). On June 22, 2021, $1,020,605 of HOME and $179,395 Neighborhood Stabilization Program - Round 1 (NSP) funding were also allocated to this project (Attachment B- Resolution 2021-06-22-1502).
Hunter House has been working on their full financing plan since prior to the 2020 funding. They have applied for tax credits through the state for at least three rounds without success. In June 2024, Service First reached out to the City with a request for more funding to aid them in achieving a higher score through the annual State of California low income housing tax credit competitive allotment. As a result of the request for additional funds, the Economic Development Department identified $1.3M of available HHAP funding as eligible for the project’s use and provided Service First with a letter of identification for use in their pursuit of 2024 tax credits. Unfortunately, Hunter House was not successful at obtaining the 2024 tax credits by late July 2024. In late 2024, the City considered de-obligating the funding obligated to Hunter House, as Hunter House appeared to be in jeopardy of losing substantial state funding due to the inability to secure funding and commence construction. Continuing to wait for Hunter House to secure full financing would put the City in violation of requirements to spend funds in a timely manner and result in the loss of funds. In the last week of December, HCD issued an additional extension to Hunter House on state funding for the project, contingent upon Hunter House being successful at the current round of HCD’s Homekey+ application.
Present Situation
The Hunter House developer, Service First, alerted the City that Homekey+ has been identified as a funding source with favorable communication from HCD in the last two months. To compete for the Homekey+ funds, the City is required to be the lead applicant with Service First, or a legally created entity for the project, as the co-applicant. While Service First will complete all of the detailed project information for the application, the City will be required to authorize the application and commit the identified funding that had not yet been formally allocated through Council for this project ($1.3M of HHAP funds). The funding is available through grant funding, however formal allocation is necessary through the attached Resolution.
There is little risk to the City in providing this support. In the best case scenario, Hunter House receives the Homekey+ funding to complete their funding plan and thus has a plan to be under construction as early as October 2025, with completion as early as the end of 2026. This is great news for the City, in that it will add 120 affordable housing units to a lot that currently sits vacant in the immediate downtown area.
If Hunter House is not awarded Homekey+ funds, HCD has stated that the extension given to Hunter House for the already allocated state funding will be revoked, creating a substantial gap in overall funding for the project (Attachment C- HCD Notice). If that happens, it would be logical and prudent for the City to de-obligate all funding ($3,041,263) from the project and look to reallocate it to projects that are more ready to lift and help the City achieve expenditure timeliness deadlines and more affordable housing through other means. It is recommended that the de-obligation be approved through the attached resolution such that if Homekey+ fails to come to fruition, the authorization to de-obligate is completed by reference to the attached Resolution and written notification from the City to the developer.
FINANCIAL SUMMARY
This Resolution commits $1,301,263 of HHAP funds to the Hunter House project, in addition to the $1,740,000 that was already committed by City Council in the Resolutions referenced in Attachments A and B. There is sufficient funding available in the Special Grants Fund, Housing Division, in the HHAP 3 and 4 projects to support this action. There is no financial impact to the City's General Fund or any other unrestricted fund as a result of taking the recommended action, as all allocated funding, previous and proposed, is funded through grants specific to affordable housing.
Attachment A - Resolution 2020-01-08-1401
Attachment B - Resolution 2021-06-22-1502
Attachment C - HCD Notice